Shaffer v. Block, s. 81-3475

• Decision Date: 20 April 1983
• Docket Number: Nos. 81-3475,81-3476 and 81-3654,s. 81-3475
• Parties: 10 Ed. Law Rep. 981 Judith SHAFFER, Plaintiff-Appellee/Cross-Appellant, v. John R. BLOCK, Secretary of Agriculture of the United States, Defendant-Appellant/Cross-Appellee, and George Steger, et al., Defendants-Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 805

705 F.2d 805

10 Ed. Law Rep. 981

Judith SHAFFER, Plaintiff-Appellee/Cross-Appellant, v. John R. BLOCK, Secretary of Agriculture of the United States, Defendant-Appellant/Cross-Appellee and George Steger, et al., Defendants-Appellants/Cross-Appellees.

Nos. 81-3475, 81-3476 and 81-3654.

United States Court of Appeals Sixth Circuit.

Argued Aug. 4, 1982.

Decided April 20, 1983.

Richard W. Hanusz, Lucas County Welfare Dept., Toledo, Ohio, for Lucas County Welfare and George Steger.

Michael H. Igoe, Steven H. Feldman, Asst. Attys. Gen., Columbus, Ohio, for Ohio Dept. of Public Welfare, Kenneth B. Creasy and Thomas McDowell.

Joseph R. Tafelski, Wm. H. Fraser and Ruth J. Weil, Advocates for Basic Equality, Laurene M. Heybach (argued), University of Toledo College of Law, Civil Law Center, Toledo, Ohio, for Judith Shaffer.

James Michael Kelley, Associate Gen. Counsel, Raymond W. Fullerton, Asst. Gen. Counsel, Ed. J. Barron, Terence G. Jackson (argued), Office of Gen. Counsel, U.S. Dept. of Agriculture for John R. Block, in cases Nos. 81-3475 and 81-3654.

Brian G. Kennedy, Leonard Schaitman, Al J. Daniels, Jr., U.S. Dept. of Justice, Civ. Div., Washington, D.C., for John R. Block in case No. 81-3476.

Before EDWARDS, Chief Circuit Judge, KEITH, Circuit Judge, and HOFFMAN ^*, Senior District Judge.

WALTER E. HOFFMAN, Senior District Judge.

This case arises under the Food Stamp Act of 1977, Pub.L. No. 95-113, Title XIII, 91 Stat. 958 (1977) (codified at 7 U.S.C. Secs. 2011-2029), and involves the question of whether a Basic Educational Opportunity grant ¹ (BEOG or BEO grant) should be counted as income in determining food stamp eligibility and benefits. The district court held that the plaintiff's BEO grant was excludable from income as a reimbursement pursuant to 7 U.S.C. Sec. 2014(d)(5) and 7 C.F.R. Sec. 273.9(c)(5). We reverse.

FACTS

During the 1979-80 academic year, the plaintiff, Judith Shaffer, was a full-time student at Michael J. Owens Technical College in Ohio. At that time, the plaintiff and her minor daughter were receiving benefits from the Food Stamp Program of $96.00 per month and $216.00 per month from the Aid to Dependent Children program. Ms. Shaffer also received two educational grants to help defray the costs of her education; an Ohio Instructional Grant of $330.00 per semester, and a BEO grant of $544.00 per semester.

On November 21, 1979, Ms. Shaffer received a notice from the Lucas County Welfare Department (LCWD), an organization responsible for administering the food stamp program, that beginning January 1, 1980, her food stamp benefits would be reduced from $96.00 per month to $43.00 per month. The reduction resulted from the welfare department including the BEOG money as income to Ms. Shaffer for food stamp eligibility and benefit purposes. ²

After receiving the notice, Ms. Shaffer requested a hearing with the Ohio Department of Public Welfare to challenge the LCWD actions. At the hearing on February 1, 1980, Ms. Shaffer argued that the BEOG money should be excluded from her income pursuant to 7 U.S.C. Sec. 2014(d)(5) as being "specifically earmarked" for education expenses. Ms. Shaffer also argued On February 29, 1980, Ms. Shaffer filed suit in the United States District Court for the Northern District of Ohio challenging the reduction of her food stamp benefits. The complaint named as defendants the Lucas County Welfare Department; George J. Steger, the director of the Lucas County Welfare Department; the Ohio Department of Public Welfare; Kenneth B. Creasy, the director of the Ohio Department of Public Welfare; and Thomas McDowell, the Chief of the Ohio Department of Public Welfare, Bureau of Food Stamps. Ms. Shaffer brought suit on her behalf and on behalf of "all other individuals who, due to receipt of certain educational grants, have been deprived of the full amount of their benefits under the Food Stamp Program." The complaint asked for class certification and prayed for declaratory and injunctive relief.

that the same result was required by the Ohio Food Stamp Certification Manual Secs. 4224.4-4226. The hearing officer ruled that the BEO grant was includable as income because the money was not specifically earmarked for education expenses and ordered that Ms. Shaffer's food stamp benefits be reduced from $96.00 per month to $61.00 per month effective March 1, 1980.

On March 27, 1980, the district court "conditionally" certified a class consisting of "all persons in the State of Ohio who have or will have food stamp benefits reduced, terminated or denied because of the inclusion (as income) of educational grants or portions thereof which are reimbursements for specific education expenses such as books, travel and school supplies." The court concluded that the requirements of Rules 23(a) and (b)(2) of the Federal Rules of Civil Procedure had been satisfied, but postponed final consideration of the class action issue until a later time.

On April 8, 1980, a proposed stipulation and settlement agreement was filed with the court. The settlement agreement would have excluded from income for food stamp purposes, educational assistance monies used for books, transportation, supplies and other school related expenses provided certain procedures were met.

Subsequent to the filing of the proposed settlement agreement the Secretary of Agriculture moved to intervene as a party defendant pursuant to Rules 24(a) and (b) of the Federal Rules of Civil Procedure. The Secretary was seeking to intervene to challenge the proposed settlement agreement as being inconsistent with the federal food stamp statute and regulations. On July 24, 1980, the district court granted the Secretary's motion to intervene. ³

On August 19, 1980, the Secretary filed a motion for summary judgment. The plaintiff countered by filing a cross-motion for summary judgment on September 11, 1980. On June 5, 1981, the district court issued its opinion and order on the motions. The district court found that plaintiff's BEO grant had been improperly included as income for food stamp purposes and ordered that the defendants allow an exclusion of the BEOG monies. The court also invalidated the proposed settlement agreement as being inconsistent with the federal food stamp regulations. Finally, the court revoked the conditional class certification it had issued on March 27, 1980.

The Secretary of Agriculture and all the state and county defendants appeal the decision of the district court excluding the BEOG money from Ms. Shaffer's income for food stamp purposes. Plaintiff cross-appeals the decision of the district court revoking the conditional class certification.

DISCUSSION

The question of whether a BEO grant should be included as income in determining food stamp eligibility and benefits will be considered first. For the reasons discussed below, we find it necessary to reverse the district court on this difficult issue and hold that Ms. Shaffer's BEOG money is includable as income in determining food stamp eligibility and benefits.

I. The Food Stamp Program

The Food and Nutrition Service of the Department of Agriculture conducts the food stamp program under the Food Stamp Act of 1977, and the Secretary of Agriculture issues regulations necessary for its administration. 7 U.S.C. Sec. 2013(a), (c). The program provides nutritional assistance to eligible households by issuing at no charge to the household "coupons" or "food stamps" that can be redeemed for food items at retail stores participating in the program. 7 U.S.C. Secs. 2013(a), 2017, 2018. Although the food stamp program is administered at the national level by the Department of Agriculture, it is administered by state agencies at the local level. 7 U.S.C. Secs. 2012(n), 2013(a), 2020. The state agencies are responsible for determining, in accordance with uniform national standards, which applicant households are eligible for the issuance of food stamps and the amount of an eligible household's allotment. 7 U.S.C. Secs. 2014(b), 2017, 2020(a).

Eligibility for the food stamp program and the amount of benefits a household receives are based on the "income" of the household. 7 U.S.C. Secs. 2014, 2017. See also 7 C.F.R. Sec. 273.10 (1982). When household income reaches a certain level, the household will not be eligible for food stamps, and as the income of an eligible household increases the food stamp allotment will decrease.

II. "Income" Under the Food Stamp Program

A. Income Generally

The Food Stamp Act contains a definition of "income" that specifies what is to be included and excluded in the income figure used in determining food stamp eligibility and benefits. The Act first defines income broadly as including "all income from whatever source." 7 U.S.C. Sec. 2014(d). See also 7 C.F.R. Sec. 273.9(b) (1982). The Act then lists the few specific exclusions and deductions that are allowed. 7 U.S.C. Sec. 2014(d), (e). See also 7 C.F.R. Sec. 273.9(b)-(d) (1982). ⁴

BEOG monies are clearly within the first part of the Act's definition of income. The question is whether educational grant money is to be excluded from income under one of the exclusions. See generally H.R.Rep. No. 464, 95th Cong., 1st Sess. 27, 29, reprinted in, 1977 U.S.Code Cong. & Ad.News 1971, pp. 1704, 2004, 2006 [herein cited as H.R.Rep. No. 464]. See also 43 Fed.Reg. 18888 (1978). The two exclusions relevant to this issue are the exclusion for educational grants and scholarships, 7 U.S.C. Sec. 2014(d)(3), and the exclusion for reimbursements, id. Sec. 2014(d)(5).

The income section of the Food Stamp Act reads in pertinent part as follows:

(d) Household income for purposes of the food stamp program shall include all income from whatever source excluding ... (3) all education loans on which payment is deferred, grants, scholarships, fellowships, veterans' education benefits, and the like to the extent that they are used for tuition and mandatory school fees at an institution of...